TARGET Services: the backbone of European financial markets

14 July 2025

By Ulrich Bindseil*

Free flow of central bank money, securities and collateral

TARGET Services comprise T2, TARGET2-Securities (T2S), TARGET Instant Payment Settlement (TIPS) and the Eurosystem Collateral Management System (ECMS). T2 settles large payments in central bank money, including those relating to monetary policy transactions; T2S settles securities transactions; TIPS settles instant payments; and the ECMS manages assets used as collateral in Eurosystem credit operations. These services facilitate the free flow of central bank money, securities and collateral across Europe, otherwise known as the “magic triangle”. Together, they form – without exaggeration – the backbone of Europe’s financial market infrastructure. TARGET Services have been continuously evolving since the launch of the euro in 1999, and they will continue to evolve in future. Ultimately, our vision is to have a truly domestic European market, in which it makes no difference whether payers and payees, or issuers and investors, transact with counterparties in their own country or anywhere else in Europe.

Visual 1

The magic triangle

Where have we come from, and where do we stand today?

This year marks the tenth anniversary of T2S and saw the launch of the ECMS, which, in conjunction with the previous launch of TIPS and the go-live of T2, also marks the completion of the Eurosystem’s Vision 2020 initiative. This initiative encompassed a consolidated Eurosystem market infrastructure, enhancements in the field of instant payments and a common collateral management system for euro area central banks.

T2S has been instrumental in harmonising post-trade services and standards in Europe. It offers a common platform on which securities can be settled in central bank money on a delivery-versus-payment basis (i.e. without principal settlement risk) across Europe, thereby eliminating differences between domestic and cross-border securities settlement. This has contributed to stronger financial integration in Europe and a true single European capital market.

With the ECMS, the Eurosystem has addressed the need to drive harmonisation of its own collateralisation techniques and procedures. It provides a common platform for collateral operations across the Eurosystem that has replaced the previous arrangements of the 20 euro area national central banks, bringing substantial efficiency gains.

Managing long-term and complex market infrastructure projects implies dealing with new issues that emerge throughout the life cycle of the project. One issue that has become increasingly important over the years is the need to ensure that market infrastructures, service providers and users are protected from cyber-attacks. It is essential that banks, other financial institutions and financial market infrastructures have adequate levels of cyber resilience to protect their own operations as well as those of the entire ecosystem.

More recently, Europe is being exposed to increasingly challenging geopolitical conditions that are affecting our market infrastructure operations and development. To better withstand external pressures, it is important to strengthen European autonomy in terms of market infrastructure and payments. This would also support the international role of the euro.

Further evolution of TARGET Services

Maintaining a leading market infrastructure position in a world of evolving user needs and market requirements entails continuously enhancing our services. Such enhancements include allowing non-bank payment service providers (PSPs) to have access to T2 and TIPS, a possible extension of T2 opening hours, interlinking TIPS with the fast payment systems of other currencies to improve cross-currency payments, exploiting the multi-currency capability of TARGET Services and moving towards a shorter standard securities settlement cycle in T2S.

Last year the Eurosystem defined a harmonised policy to allow non-bank PSPs to access central bank-operated payment systems. As of October 2025, non-bank PSPs meeting certain requirements will be able to access T2 (for settling payments) and TIPS (for settling instant payments). The requirements will be set out in the TARGET Guideline and will create a level playing field for banks and non-banks.

In alignment with the G20 goals for enhancing cross-border payments, the Eurosystem is considering the possibility of moving T2 towards a 24/7 model. This increased availability would support the international role of the euro and accommodate the growing demand for real-time settlement resulting from the increase in instant payments. It would also foster innovation and facilitate the use of central bank money.

In the area of retail payments, the Eurosystem has launched two initiatives to enhance cross-border payments within the EU and beyond. The first concerns the implementation of a cross-currency settlement capability in TIPS that will allow instant payments originating in one TIPS currency to be settled in another TIPS currency in central bank money. Initially, settlement will be available in three currencies: euro, Swedish kronor and Danish kroner. The go-live of the TIPS cross-currency service is planned for October 2025.

This second initiative aims to establish links with partners outside the EU to improve cross-border payments globally. It involves the implementation of a cross-currency settlement service for the TIPS platform based on the European Payments Council’s One-Leg Out Instant Credit Transfer scheme and the exploration of the connection of TIPS to Project Nexus, a multilateral network of instant payment systems led by the Bank for International Settlements.

From the outset, T2, T2S and TIPS were designed as services with multi-currency capability. This means that they are able to settle transactions in central bank money not only in euro, but in any other currency. For the Eurosystem, the onboarding of non-euro currencies from other European Economic Area countries is an important element supporting European financial integration and the capital markets union. Beyond the mutual non-financial benefits for all institutions involved, integrating non-euro currencies adds value in terms of increased transaction volumes and cost-sharing opportunities.

For most of the last decade, the global standard for securities settlement has been the second business day after the date on which the securities were traded (T+2). However, international capital markets have gradually started shifting to a shorter securities settlement cycle, namely T+1. This trend received a significant boost when the United States, Canada and Mexico moved to T+1 settlement in 2024. Based on a recommendation from the European Securities and Markets Authority, the European Commission has proposed a transition to T+1 in Europe in October 2027. The Eurosystem is contributing to the smooth implementation of T+1 in T2S and will support T2S central securities depositories and their participants in maintaining a high level of settlement efficiency in a T+1 environment.

Into the future: digital euro and DLT

Looking further ahead, a digital euro and the deployment of distributed ledger technology (DLT) could further strengthen European monetary sovereignty, enhance competitiveness and pave the way for more integrated and resilient financial market infrastructures.

The current preparation phase of the digital euro project is scheduled to run until October 2025, after which work will continue towards the ultimate decision on whether to issue digital euro. It is worth noting that a digital euro would ensure access to a secure, reliable and universally accepted digital payment solution that complements cash. At the same time, it would help to avoid over-reliance on non-European PSPs that dominate the retail payments market and would make payment in central bank money possible for citizens who prefer to pay electronically.

The trend towards the digitalisation of retail payments is real, but is there any reason why public and private money should not continue to co-exist in a digitalised world? Why would a central bank not continue to meet society’s changing needs simply because it sticks exclusively to issuing central bank money in physical format (banknotes and coins)? Over recent decades the private payment industry has almost completely abandoned physical formats, and cheques and bills of exchange are largely a thing of the past. Retail payments are at the core of modern society, and payment instruments are subject to strong network effects. It cannot be assumed that successful private companies will not try to abuse market power or that they will always take into account the public good. This is and will remain a strong justification for continuing to make central bank money available for retail payments, even in a digital age.

Upon completion of the European Union’s legislative process, the Governing Council will decide whether to issue a digital euro. Such a decision would initiate the final phase of digital euro development and the roll-out of digital euro use cases.

Meanwhile, the Eurosystem’s work on the provision of central bank money for the settlement of wholesale DLT-based transactions will contribute to the development of a dynamic and unified digital asset market. This will drive innovation and unlock new business opportunities across Europe.

In a nutshell, TARGET Services form the backbone of European financial market infrastructures. They ensure integrated payment in central bank money, securities settlement and collateral management. Keeping these services fit and healthy is one of the core tasks of the Eurosystem. We will therefore continue to embrace changing needs and technological progress while being mindful of the growing importance of strengthening resilience to geopolitical shifts.

*Ulrich Bindseil was the Director General of the Directorate General Market Infrastructure and Payments until 30 June 2025.

The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.

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